Tech workers can’t jointly sue Apple, Google for “cold calling” deal

But employees can try again, and unflattering CEO e-mails are being exposed.

In 2010, the government announced it had sued several large tech companies, including Apple, Google, Intel, Adobe, Intuit, and Pixar over their hiring practices. The companies' top execs had agreed to not "cold call" competitors' most valuable workers in an attempt to recruit them. That illegally stifled competition and held down the salaries of skilled employees, the government said.

The tech companies quickly agreed to a settlement that brought the investigation and lawsuit to a close. However, a civil suit brought by five ex-employees followed, claiming that the former workers at Adobe, Intuit, and Intel lost out on better salaries because of the agreement. The lawsuit sought class action status. Earlier this year, US District Judge Lucy Koh, who's overseeing the case, said that Apple CEO Tim Cook should get ready to be deposed by lawyers representing the plaintiffs.

Today, the civil suit, which is against all six companies snared in the Department of Justice action as well as Lucasfilm, has hit a potentially fatal roadblock. This afternoon, Koh ruled [PDF] that the workers can't form a class, because their cases are too different to be lumped together as one.

If the litigation were to move forward, it could highlight some embarrassing e-mails from some of the nation's top executives at tech companies. That kind of evidence largely didn't come out from the settled government case. But there's a taste of it in today's order from Koh.

For example, Koh's order today quotes Pixar President Ed Catmull writing to Disney, saying "[w]e have avoided wars up here in Norther[n] Caliornia because all of the companies up here—Pixar, ILM [Lucasfilm], Dreamworks, and a couple smaller places—have conscientiously avoided raiding each other."

Koh took note of comments from Steve Jobs about recruiting as well: "When a recruiter from Google's engineering team contacted an Apple employee in 2007, Apple CEO Steve Jobs forwarded the message to Google CEO Eric Schmidt and stated, 'I would be very pleased if your recruiting department would stop doing this,'" Koh wrote in her order.

However, the judge also considered evidence from dueling economists: one representing the plaintiffs, who argued that "all or most" of the employees in the class had been harmed by the "no cold calling" agreements, and a defense expert who argued that any harm was individualized, not on a class-wide basis. She found flaws with the methods used by the workers' expert for showing harm and damages on a class-wide basis.

The plaintiffs will get another chance to make their argument, since Koh wrote the order "with leave to amend," which is not unusual when denying such motions on the first try. And they sound eager to do so. "Plaintiffs appreciate the court's thorough consideration of the evidence and are prepared to address the court's concerns fully in a renewed motion," a lawyer for the plaintiffs told The Associated Press.

Even though the tech companies won today, Koh seems quite convinced in places that the employees have a real case.

She was dismissive of some of the defense evidence, which consisted of employee declarations "drafted specifically to oppose this Motion." More convincing were the "internal, contemporaneous documents... such as CEO-to-CEO emails, Power Point presentations regarding compensation and recruitment... and inter-office communications."

Koh wants more evidence to be sure; and the plaintiffs will have a chance to give it to her. Koh writes:

"[T]he Court finds that Plaintiffs’ documentary evidence weighs heavily in favor of finding that common issues predominate over individual ones for the purpose of being able to prove antitrust impact. Nevertheless, the Court has concerns that Plaintiffs’ examples, though compelling, may not be sufficient to show that all or nearly all Class members were affected by the anti-solicitation agreements without additional documentary support or empirical analysis."

The evidence the workers' lawyers need may well be in their hands. Since the class certification hearing, they have deposed approximately 50 high-ranking employees at the defendant companies, including CEOs and heads of Human Resources. They've received 10,000 documents. There's a lot there, and some of the most interesting parts may finally see public scrutiny in the near future.

Promoted Comments

A class action status is all that makes sense; no single employee can prove that they in particular didn't receive a better offer, but Apple/Google/Adobe engineers as a group definitely did not get the same competitive salaries they may otherwise have gotten. If there can't be a class action suit, there needs to be something more to punish companies for entering such a blatantly illegal and anti-employee agreement with eachother.

60 Reader Comments

A class action status is all that makes sense; no single employee can prove that they in particular didn't receive a better offer, but Apple/Google/Adobe engineers as a group definitely did not get the same competitive salaries they may otherwise have gotten. If there can't be a class action suit, there needs to be something more to punish companies for entering such a blatantly illegal and anti-employee agreement with eachother.

Ummmmm..... go lawyers, go!? I predict nothing for the class, just their lawyers. But at least a smackdown is in the works for these large egos. Exposing their true personalities will hurt them more than any money loss.

This seems like an incredibly obvious application of class action status. Certainly employees are different as individuals, but a company level agreement to not compete for talent means there is less incentive for employers to offer higher salaries. It makes no difference whether an individual employee is looking for a new job, or would consider taking a rival offer if it was made to them. The fact that they could means their employer would have to pay them more to guard against such a risk. Non-compensation based ways of compensating for the risk (e.g., the ban on cold-calling) means they have to focus less on compensation...which impacts all employees.

I do not get what the big deal is. Most of us who get spammed by random recruiters will be happy to not get disturbed...

What they agreed not to cold call each other's employees, those individuals were free to apply to a position on their on in these companies...

The government investigated them and they paid a fine and agreed to not do it again - that should suffice.

How can this be a class action lawsuit ?? I cannot imagine any developer signing up for this. It would be is a frivolous lawsuit that only the lawyers will make money off of.

I agree with you. I don't see the problem in a company asking another company not to vulture up its talent, SO LONG as they aren't price-setting (er, salary-setting) to artificially keep the employee's wages low. They mentioned slides about compensation, but on the whole, it sounds like the companies were just trying to hold on to some top talent, which is entirely reasonable, especially in light of the fact that the employees had the freedom to contact the recruiters on their own. It strikes me as ridiculous that anybody could sue somebody over this sort of thing.

I do not get what the big deal is. Most of us who get spammed by random recruiters will be happy to not get disturbed...

What they agreed not to cold call each other's employees, those individuals were free to apply to a position on their on in these companies...

The government investigated them and they paid a fine and agreed to not do it again - that should suffice.

How can this be a class action lawsuit ?? I cannot imagine any developer signing up for this. It would be is a frivolous lawsuit that only the lawyers will make money off of.

I agree with you. I don't see the problem in a company asking another company not to vulture up its talent, SO LONG as they aren't price-setting (er, salary-setting) to artificially keep the employee's wages low. They mentioned slides about compensation, but on the whole, it sounds like the companies were just trying to hold on to some top talent, which is entirely reasonable, especially in light of the fact that the employees had the freedom to contact the recruiters on their own. It strikes me as ridiculous that anybody could sue somebody over this sort of thing.

This. I work in contracts/subcontracts for a government contractor, and this is a common clause throughout the industry. Basically it says X company can't solicit Y company employees for a period of Z years (usually the life of whatever program they are teamed for), with the qualifier that said clause doesn't apply should an employee contact company X on their own. It's purely to keep talent (in government contracting, government site employees are basically the product we sell, with obvious differences, so talent for us is like chamfers are to Apple). Anyway, my point is that the employee is always free to browse the market and aim at a higher salary if they feel they need/want it or just want a change.

And the Politically Correct historical revisionists are on the run once again.

What is consistently ignored by the headline happy justice dept is the basis of the 'agreement' was corporate mutually assured destruction during the late 70's and early 80's. Raiding was common and lawsuits were bandied about nearly weekly as threats to anti-competition agreements, intellectual property theft, trade secrets could and did lock new hires from doing any productive work for years. Better a lawsuit than having an entire department hired away by a direct competitor.

The solution was straight forward, no cold calling as that was typically based on personal knowledge of a particular individual by either a company or a head hunter. If the employee did the call then there were no threats between companies although many situations did arise regarding employees trying to do an end run around corporate theft of IP and trade secrets leading to the predicted results. However, this was not unleashed on Silicon Valley wholesale it is had threatened to do previously.

If the employees in this case didn't look for a better solution they why is the company at fault for their not getting off their overpaid butts to look for a different job?

To all those "this is ridiculous" responders: maybe the employees didn't think they would be of interest to one of the other companies. Even if they wanted to stay with their job (and thus weren't looking elsewhere), they still could have taken the unsolicited job offers to their superiors and used them to negotiate a higher salary while keeping their existing job. This "gentleman's agreement" potentially prevented them from earning their "true" worth.

The workers are getting mad at the companies for making competitive job selection and salary deductions... If they are so angry why do they not just make their own company with their immense skills and expertise?

Because few skilled programmers or engineers also have the strong business acumen (or even the desire) to run a company, which would take them away from the very things they enjoy and are actually good at.

This seems like an incredibly obvious application of class action status. Certainly employees are different as individuals, but a company level agreement to not compete for talent means there is less incentive for employers to offer higher salaries. It makes no difference whether an individual employee is looking for a new job, or would consider taking a rival offer if it was made to them. The fact that they could means their employer would have to pay them more to guard against such a risk. Non-compensation based ways of compensating for the risk (e.g., the ban on cold-calling) means they have to focus less on compensation...which impacts all employees.

If these employees aren't actively seeking to improve their own wages by seeking offers from competitors, I don't know how they were smart enough to get hired by these companies in the first place. If you really think they just sit around, content with their salaries until somebody cold calls them, then you, sir, are an idiot. This sort of agreement shouldn't have an impact on salary levels.

The types of employees we're talking about are not likely the outgoing aggressive "alpha" personality types that do what you describe. You alpha types never seem to understand anyone who isn't aggressively out only for themselves like you are.

I do not get what the big deal is. Most of us who get spammed by random recruiters will be happy to not get disturbed...

What they agreed not to cold call each other's employees, those individuals were free to apply to a position on their on in these companies...

The government investigated them and they paid a fine and agreed to not do it again - that should suffice.

How can this be a class action lawsuit ?? I cannot imagine any developer signing up for this. It would be is a frivolous lawsuit that only the lawyers will make money off of.

Anti-pouching agreements are akin to non-compete clauses (which were outlawed in California in 1872 according to Wikipedia), except with anti-pouching agreements you don't know "you" "signed" it. But the real "big deal" with this is that you're unlikely going to be paid a fair compensation if a company knows it doesn't have to outbid a rival to get you as a worker.

One common problem for getting class certification in employment cases is that there may be too much variation in the types of employees and the kind of harm they may have suffered. One element of a class action is that there has to be questions of law and fact common to the class and the problem here is that the facts may be too varied (and perhaps the law too, in terms of the damages phase).

In the ruling, it states that the plaintiffs tried to define the class as basically all salaried workers except for retail and basically executives/board members ("All natural persons employed on a salaried basis in the United States by one or more of the following: (a) Apple from March 2005 through December 2009; (b) Adobe from May 2005 through December 2009... Excluded from the Class are: retail employees; corporate officers, members of the boards of directors, and senior executives of all Defendants.)

Such a class is really really broad, and a judge is likely to accept the argument that the alleged harm suffered by a programmer vs. a marketer vs. an artist vs. an in house lawyer would be different due to different job markets, hiring practices, salary ranges, etc.

The plaintiffs also tried to propose a smaller alternative class limited to "technical" employees, but the judge seemed to think that it still wasn't narrow enough.

...If these employees aren't actively seeking to improve their own wages by seeking offers from competitors, I don't know how they were smart enough to get hired by these companies in the first place. If you really think they just sit around, content with their salaries until somebody cold calls them, then you, sir, are an idiot. This sort of agreement shouldn't have an impact on salary levels.

To you and all others who think like this -- I believe this would have an obvious impact on your salary levels.

There is a reason why US companies can fire you for talking about how much you earn and make this such a taboo topic:

No one really knows how much they're worth.

So you're a star engineer at Apple, you have the feeling you might be somewhat important and money seems to be OK, but you can't really be sure. It's hard to bargain in this sitaution. Because, again, you don't know and the company does everything to make it stays that way. Doubly difficult to bargain because it is, after all, quite dangerous for your continued employement and you kind of like your current job.

Now imagine you get a call from Google offering 2x the benifits.

Suddenly, you have a giant bargaining chip: you know for a fact that you are worth at least 2 times as much as you are currently recieving.

the other side of the coin isnot filling a talent slot means orders won't be filledso the smart companies shift to internal employee developmenttrade school recruiting and capitol investment because....

employees hired away from direct competitors at a wage that will leave the product competitiveare not loyal, and are rarely the best of the competitors staff [those usually form their own company]IMHO one is always better off with internal growth of staff.

a great story about a frustrated employee and the company he then builtA FOOT IN THE DOORby Alfred C. Fullerseems to be out of print and none at amazonlibrary of congress ccn 60-14996

This seems like an incredibly obvious application of class action status. Certainly employees are different as individuals, but a company level agreement to not compete for talent means there is less incentive for employers to offer higher salaries. It makes no difference whether an individual employee is looking for a new job, or would consider taking a rival offer if it was made to them. The fact that they could means their employer would have to pay them more to guard against such a risk. Non-compensation based ways of compensating for the risk (e.g., the ban on cold-calling) means they have to focus less on compensation...which impacts all employees.

If tech workers can't get recognized as a class when their employers work out anti-competitive deals to prevent them from getting better salary offers, they're just asking for the employees to make their own classes by forming unions.

...If these employees aren't actively seeking to improve their own wages by seeking offers from competitors, I don't know how they were smart enough to get hired by these companies in the first place. If you really think they just sit around, content with their salaries until somebody cold calls them, then you, sir, are an idiot. This sort of agreement shouldn't have an impact on salary levels.

To you and all others who think like this -- I believe this would have an obvious impact on your salary levels.

There is a reason why US companies can fire you for talking about how much you earn and make this such a taboo topic:

No one really knows how much they're worth.

So you're a star engineer at Apple, you have the feeling you might be somewhat important and money seems to be OK, but you can't really be sure. It's hard to bargain in this sitaution. Because, again, you don't know and the company does everything to make it stays that way. Doubly difficult to bargain because it is, after all, quite dangerous for your continued employement and you kind of like your current job.

Now imagine you get a call from Google offering 2x the benifits.

Suddenly, you have a giant bargaining chip: you know for a fact that you are worth at least 2 times as much as you are currently recieving.

This knowledge is a huge deal!

Companies can't legally fire their employees for discussing salaries in the USA.

The workers are getting mad at the companies for making competitive job selection and salary deductions... If they are so angry why do they not just make their own company with their immense skills and expertise?

The workers are getting mad at the companies for making competitive job selection and salary deductions... If they are so angry why do they not just make their own company with their immense skills and expertise?

If these employees aren't actively seeking to improve their own wages by seeking offers from competitors, I don't know how they were smart enough to get hired by these companies in the first place. If you really think they just sit around, content with their salaries until somebody cold calls them, then you, sir, are an idiot. This sort of agreement shouldn't have an impact on salary levels.

The most valuable employees focus on their work more than anything else. They don't often think about how much money they are making or how great their benefits aren't or the prospect that their own employer or another employer might be willing to pay more. They're having too much fun building their next big thing. But if it's pointed out to them that they COULD be making more or working on something even cooler, that's interesting.

The ones who are actively seeking to improve their wages by seeking offers from competitors aren't worth much. They're not as engaged in their work and therefore don't produce the same the quantity or quality of work.

The workers are getting mad at the companies for making competitive job selection and salary deductions... If they are so angry why do they not just make their own company with their immense skills and expertise?

That won't compensate them for the harm done FOR YEARS.

Um... yeah -- and court cases like this typically take how long?

Less time than employers would to voluntarily give them back pay to compensate them for being screwed over in previous years.

...If these employees aren't actively seeking to improve their own wages by seeking offers from competitors, I don't know how they were smart enough to get hired by these companies in the first place. If you really think they just sit around, content with their salaries until somebody cold calls them, then you, sir, are an idiot. This sort of agreement shouldn't have an impact on salary levels.

To you and all others who think like this -- I believe this would have an obvious impact on your salary levels.

There is a reason why US companies can fire you for talking about how much you earn and make this such a taboo topic:

No one really knows how much they're worth.

So you're a star engineer at Apple, you have the feeling you might be somewhat important and money seems to be OK, but you can't really be sure. It's hard to bargain in this sitaution. Because, again, you don't know and the company does everything to make it stays that way. Doubly difficult to bargain because it is, after all, quite dangerous for your continued employement and you kind of like your current job.

Now imagine you get a call from Google offering 2x the benifits.

Suddenly, you have a giant bargaining chip: you know for a fact that you are worth at least 2 times as much as you are currently recieving.

This knowledge is a huge deal!

Companies can't legally fire their employees for discussing salaries in the USA.

Tech workers need to unionize. This isn't the only thing they are conspiring on. They keep running to the government saying there is a shortage of tech workers and they need to import more workers. The only shortage is one of people willing to take advantage of themselves and work for peanuts. We usually pay for our own certifications and training to keep ourselves relevant, but employers don't want to pay for highly trained and certified technicians. Instead they'd rather import desperate Indians and take advantage of them. Now Cisco is going to open a tech center in Myanmar to do the same thing that everybody has been doing to the Indians.

it's true that most(all?) US states follow at-will employment, but some jurisdictions like California lists certain activities including talking about your salaries as protected. California Labor Code 232(c) states: "No employer may do any of the following: ... (c) Discharge, formally discipline, or otherwise discriminate against an employee who discloses the amount of his or her wages."

First, I have no legal knowledge nor additional information beyond what has been written in this article. That being said, going by what's in this article, I don't see any evidence of illegal hiring practices. I see quotesreferring to a gentlemen's agreement with no binding contracts and a complaint but again, without any contractual obligations.

I stress again, there could be more condemning evidence, but the snippets mentioned in the article hardly strikes me as illegal.

Agreements to "conscientiously (avoid) raiding each other" without a written contract are still illegal.

goodstuff wrote:

First, I have no legal knowledge nor additional information beyond what has been written in this article. That being said, going by what's in this article, I don't see any evidence of illegal hiring practices. I see quotesreferring to a gentlemen's agreement with no binding contracts and a complaint but again, without any contractual obligations.

I stress again, there could be more condemning evidence, but the snippets mentioned in the article hardly strikes me as illegal.

Agreements to "conscientiously (avoid) raiding each other" without a written contract are still illegal.

goodstuff wrote:

First, I have no legal knowledge nor additional information beyond what has been written in this article. That being said, going by what's in this article, I don't see any evidence of illegal hiring practices. I see quotesreferring to a gentlemen's agreement with no binding contracts and a complaint but again, without any contractual obligations.

I stress again, there could be more condemning evidence, but the snippets mentioned in the article hardly strikes me as illegal.

Is that really so? I might see a case if someone was refused employment due to such an agreement in place, but I find it absurd (although not for the first time) to make it illegal for companies to simply agree not to pursue an individual employed by another who has made NO overtures of desiring employment in said other company. Do you by any chance have a citation for this claim, or is there a misunderstanding of what both of us stated?

A class action status is all that makes sense; no single employee can prove that they in particular didn't receive a better offer, but Apple/Google/Adobe engineers as a group definitely did not get the same competitive salaries they may otherwise have gotten. If there can't be a class action suit, there needs to be something more to punish companies for entering such a blatantly illegal and anti-employee agreement with eachother.

I don't think its anywhere near proven that "Apple/Google/Adobe engineers as a group definitely did not get the same competitive salaries they may otherwise have gotten". To do that, you would have to show that the companies involved engage in cold calling on a regular basis and would have done more of it had they not entered into an agreement. If they merely engaged in the deal out of fear that other companies might want to start cold calling in the future, then it is very uncertain that any damage was done. Secondly, you'd have to show that employees who are hired after being cold called get better compensation than those who apply for jobs via the usual channels or those who remain loyal to a single company. While you may conjecture that this is the case, a court of law should require some actual standard of proof.

As for your comment that it is "blatantly illegal"- that wasn't so obvious at the time. The Apple/Google agreement was well known at the time- if they thought they were doing something wrong they would have been hiding it.

Finally, I don't see this as a good advertisement for government intervention. Any "peace deals" between Apple and Google fell would have quickly fallen apart because of good old competition. All that government time and money probably brought and end to the agreement about six months before the thermonuclear Apple/Google war would have started anyway. Same thing can be said for Microsoft- all those millions of dollars of public money spent on stupid anti-trust non-sense had no effect on MS- the company's weaknesses were already sowing the seeds of its destruction in mobile and many other domains.

Agreements to "conscientiously (avoid) raiding each other" without a written contract are still illegal.

goodstuff wrote:

First, I have no legal knowledge nor additional information beyond what has been written in this article. That being said, going by what's in this article, I don't see any evidence of illegal hiring practices. I see quotesreferring to a gentlemen's agreement with no binding contracts and a complaint but again, without any contractual obligations.

I stress again, there could be more condemning evidence, but the snippets mentioned in the article hardly strikes me as illegal.

Is that really so? I might see a case if someone was refused employment due to such an agreement in place, but I find it absurd (although not for the first time) to make it illegal for companies to simply agree not to pursue an individual employed by another who has made NO overtures of desiring employment in said other company. Do you by any chance have a citation for this claim, or is there a misunderstanding of what both of us stated?

Yeah, its interesting that there is absolutely no legal obligation for Apple to cold call Google employees or even hire them at all. But the action of talking about it is enough to cause legal problems? What if Apple posted a note on their website saying "we do NOT cold call unless we hear that you've cold called our people"- would that be illegal? What if Apple and Google had a meeting and decided that neither of them would cold call anyone? Would the government then require tech companies to start cold calling? Even if they had never done it before? Do I have to cold call people if I own a business? Where does this nonsense stop?

Cases like this will give companies an incentive to keep their discussions off the record I guess. I know there's laws requiring records to be kept, but this will create powerful incentives to find ways around that and that's bad for accountability and transparency.